Tips for avoiding foreclosure scams

URBANA, Ill.—Get involved with one of the many foreclosure con artists operating right now, and you’ll lose your money, ruin your credit rating, and wipe out any equity you have in your home, said University of Illinois Extension Consumer and Family Economics Educator Susan Taylor.

“Victims are easy to find because mortgage lenders publish notices before foreclosing on homes,” Taylor said. “Con artists then approach their targets in person, by mail, over the telephone, or by e-mail.

“They also advertise their services on Web sites or in publications, referring to themselves by official-sounding titles, such as ‘foreclosure consultant’ or ‘mortgage consultant.’ They may market themselves as a ‘foreclosure service’ or ‘foreclosure rescue agency,’” she added.

“Your mortgage lender—or any legitimate financial counselor—can help you find real options to avoid foreclosure,” she said. “If someone offers to negotiate with your lender or arrange to stop or delay foreclosure for a fee, carefully check that person’s credentials, reputation and experience.”

She advised that consumers watch out for the following foreclosure scams:

• Lease-back or repurchase scams. Be very suspicious if someone offers to pay your mortgage and rent your home back to you. This scheme often involves signing the deed to your home over to the con artist, who may promise to sell your home back to you—which is difficult, if not impossible, under the terms of the contract.

Signing over the contract gives the con artist the power to evict you, raise your rent, sell the house, or steal the equity you have in your home. You will still be responsible for your mortgage, so if the con artist stops paying it, your lender has the right to foreclose, and it will go on your credit record.

• Refinance fraud. Look out for people posing as mortgage brokers or lenders who offer to refinance your loan so you can afford the payments. Con artists may trick you into signing over the ownership of your home by saying you’re signing documents for a new loan. Even if you’re a victim of fraud, you could still lose your home.

• Bankruptcy schemes. Several scams attempt to abuse the bankruptcy laws. For example, a con artist may ask you to give a partial interest in your home to one or more people. Each holder of a partial interest can then file bankruptcy, one after another. The bankruptcy court will issue a “stay” order each time to temporarily stop foreclosure. However, the stay does not excuse you from making payments or from repaying the full amount of your loan.

In another kind of scam, a con artist may offer to obtain refinancing or negotiate a payment plan with your lender. If you make payments to the scammer, he may keep the money rather than pay the lender on your behalf. He may even file a bankruptcy case in your name, without your knowledge, as part of the scam.

Here are some tips on how to protect yourself from scams, said Taylor.

• Read and understand every document you sign. If it’s too complex, seek advice from a lawyer or an approved, trusted financial counselor. Never sign documents with blank spaces that can be filled in later. Never sign a document that contains errors or false information, even if someone promises to correct them later.

• Get promises in writing. Oral agreements relating to your home are usually not legally binding. Protect your rights with a written document or contract signed by the person making the promise. Keep copies of all contracts you sign.

• Make your mortgage payments directly to your lender or the mortgage servicer. Do not trust anyone else to make those payments for you.

• Be very careful about signing over your deed. Never do this without getting the advice of your lawyer, financial adviser, or an independent person you can trust. Understand the terms of the deal you are making. In signing over your deed, you lose your rights to your home and any equity built up in it.

• Report suspicious activity to the Federal Trade Commission and to your state and local consumer protection agencies. This will prevent others from becoming victims.

To find legitimate help for your financial problems,

• Contact your mortgage lender or mortgage servicer as soon as you think you’re unable to make your payment. If you are current on your loan or not seriously late on your payments, they may be able to identify options that will help you.

For other good advice about getting through tough financial times, including which bill to pay first, how to talk to your creditors, how to save food dollars, how to talk to your children about your financial situation, and more, visit U of I Extension’s “Getting Through Tough Financial Times” Web site at http://www.ToughTimes.illinois.edu.

One thought on “Tips for avoiding foreclosure scams”

Real estate has attracted more than its fair share of crooks over the past few years. Isn’t this kind of behavior by loan underwriters, buyers, agents and Wall street exactly what got us in this mess in the first place.